What Exactly is Time Varying Pricing?

Time varying pricing is a method for reducing demand for electricity on California’s electricity grid. It’s really pretty simple: the highest demand on the electricity grid is typically during peak afternoon times when most people are using a lot of energy at work or at home. In order to avoid black outs from too much demand at one time on the grid, utilities use different prices for energy at different times of the day. Another important reason for time varying pricing is that it reduces the need to build additional power plants to meet the peak demand which is usually only short periods of time during the hottest days of summer.

Time-Varying Pricing is an umbrella term for Time-of-Use and Peak Day Pricing. Pacific Gas and Electric Company (PG&E) employees have been educating their customers on time varying pricing because it was being put into effective from 2010 to 2014.

The California Public Utilities Commission (CPUC) regulates privately owned electric companies such as Pacific Gas and Electric Company. As part of a plan by the California Public Utilities Commission to ensure greater reliability from our electric grid, businesses are now on time varying pricing electric rates. The CPUC serves the public by ensuring safe, reliable utility service and infrastructure at reasonable rates while also protecting the environment and California’s economy.

Under Time-Varying Pricing, there are two rate plans: Time-of-Use and Peak Day Pricing. PG&E customers can log in on PG&E’s website to view the rates and energy usage. Time-of-Use pricing includes the following rate categories: Partial-Peak is late morning and early evening. On-peak is weekday afternoons. The highest costs for electric energy usage are during on peak times which occurs from May through October. Off-Peak is when energy costs are lowest and is late in the evening, early morning, weekends and holidays. Peak Day Pricing is provided only during the hottest days of the year which is typically 9 – 15 days per year during the summer. Utilities such as PG&E provide substantial credit on a customer’s bill when they conserve energy during these peak days, but it is voluntary. Peak days occur when temperatures are at or above 98°F on weekdays or 105°F on weekends and holidays; or when the California Independent System Operator (which controls the flow of electricity across the grid) declares emergency conditions, or when market prices are extremely high. Notification of events are communicated via e-mail, phone call or by the internet by 2:00 pm the day before which gives customers advance warning.

Time varying pricing is a great way to reward those who are willing and able to conserve energy during high use times. It helps keep California’s energy extremely reliable and it reduces greenhouse gas emissions. It’s like any commodity, you pay more for a service or good when it’s in high demand. Most rational people are financially motivated so this method of pricing works well for individuals and society as a whole.

Contact your local public utility to learn more about Time-Varying Pricing.